Considering Divorce? Do It Now To Avoid a Greater Tax Burden
JACKSON, Mississippi. Starting January 1st of next year, alimony payments will no longer be deductible by the payer. This could have a negative impact on alimony settlements going into the new year. Alimony recipients might receive less money when trying to negotiate a new settlement even though going forward they won’t be taxed on the alimony they receive. Divorce lawyers are encouraging couples who are considering divorce to finalize their alimony agreements before the end of December to avoid the additional tax burden. Forbes reports that couples who finalize their divorce and alimony agreements before the end of the year will be grandfathered in to the old tax law. Forbes reports that couples only need to finalize a written agreement before the end of this year. This means that even if other aspects of your divorce remain in negotiations, it may be wise to finalize the alimony aspect as soon as possible to avoid additional tax burdens. However, you also shouldn’t settle for a bad alimony deal just to avoid facing the consequences of the new tax law. This is why it is important to speak to a qualified divorce lawyer like the Law Office of Andrew Sorrentino, P.L.L.C. in Jackson, Mississippi.
Under current tax law, alimony payers can deduct alimony payments from their income, while the payee considers the alimony income, which is taxable. This shifts the tax burden from the higher income person to the lower income person, often reducing the former couple’s combined tax burden. According to CNBC, the new alimony tax law is projected to increase the IRS’s revenues by $6.9 billion. Lawyers who have looked at the implications of the tax law are saying that women may be more likely to suffer financially under the new tax law. Women tend to receive alimony and they may find themselves not only paying higher taxes if they finalize their alimony settlements in the new year, but they may also receive less in alimony because the tax law doesn’t incentivize the payer to pay more each year. Only three percent of alimony recipients are men.
Couples who are considering divorce may want to speak to the qualified divorce attorneys in Jackson, Mississippi at the Law Office of Andrew Sorrentino, P.L.L.C. in Jackson, Mississippi. Our firm can review whether alimony is appropriate, and help you understand your financial and legal responsibilities. Finalizing an alimony settlement before the year ends can potentially save you thousands. If you do get divorced in the new year, it is important to speak to a qualified lawyer because the kind of alimony settlement you make next year might be far different than the alimony settlement you’d reach this year, due to the tax implications.
Couples who are happily married who have prenuptial agreements may also want to speak to an attorney to consider how the new tax law could impact their alimony payments and whether the new tax law means that prenuptial agreements should be revised.
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